During the past twelve months there has been an increase in almost every component of credit union lending, leading to a 10.2% growth rate for the total portfolio. However, no area has grown as rapidly as the 29.0% rate posted in business loans since first quarter 2005.
The sharp growth is not due to any one factor but rather to a combination of factors which drove the total value of outstanding member business loans up to $16.7 billion. Outstanding member business loans now account for approximately 3.5% of total loans, thanks to both an increase in loan originations as well as the number of credit unions originating these loans.
One of the factors responsible for the growth has been the increase in average loan value over the past year. The value of the average business loan origination in the first quarter increased 6.3%, up to $147,705 from $138,929 during first quarter last year.
Coupled with the fact that these loans have, on average, a higher value is the fact that we are also seeing a greater volume of loans issued. Fist quarter business loan originations have grown 20% since the first three months of 2005 to $2.25 billion. Although part of this growth is due to an increase in loan originations at credit unions that have historically offered business loans, another chunk of this growth comes from credit unions new to the market. Last year at the end of the first quarter, there were approximately 780 credit unions with outstanding business loans. When the first quarter data from 2006 was released, it showed that there were now more than 880 credit unions with outstanding business loans.
Although only 10% of credit unions are lending to member businesses, there is clearly a need being met by credit unions in this market. The growth in both origination levels and the number of credit unions in this market is a positive sign for this small but growing piece of credit union lending.
The first quarter of 2006 sets the pace for the rest of the year. Learn more about first quarter trends and analysis with Callahan & Associates’ 1st Quarter Research & Data Report.